Convergence GAAP means Generally Accepted Accounting Principles which are a collection of guideline and practices used by the accounting community. In the U.S., these standards are set by the Financial Accounting Standards Board (FASB) and continually update when new accounting issues and concerns arise with GAAP (investor glossary). Outside the U.S. there is the International Financial Reporting Standards (IFRS) which are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements (IFRS). The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting. Convergence means the occurrence of two or more things coming together. The International Convergence of Accounting Standards phrase refers to both a goal and the path taken to reach it. What does the “International Convergence of Accounting Standards” mean? It means the FASB believes that the ultimate goal of convergence is a single set of high quality, international accounting standards that companies worldwide would use for both domestic and cross-border financial reporting. The path toward that goal is the collaborative efforts of the FASB and the International Accounting Standards Board (IASB) to both improve U. S. generally Reporting Standards (IFRS) and eliminate the difference between them. The FASB believes there is high demand for international convergence by investor’s desire for high quality internationally comparable financial information that is useful for decision making (fasb.org). The FASB and the IASB has been working together toward convergence since 2002. In the Norwalk Agreement both the FASB and IASB pledged to use their best efforts to make their existing financial reporting standards fully compatible as soon as is practicable and to coordinate their future work programs to ensure that once achieved, compatibility is maintained (fasb.org). There are still major obstacles out there towards setting a single high quality international accounting standard which include cultural differences, political disturbances, varying level technological developments in different countries and differences in legal and tax systems. One of the major problems facing human race is cultural differences. Enforcing accounting standards may go against ones culture belief and might seem as an attempt to be disrespect toward the culture valve of the people. The activities of the politicians will always be towards bending regulations, laws and standards to favor them. They lobby to make the accounting standard to fit in their general plan which usually doesn’t benefit the general masses. It will be a hard task to integrate a system that is underdeveloped with an advanced system. People with less developed accounting system may resist the change and the expense it will create to make this change. The differences in both legal and tax system must be crossed before any success will be in having a single accounting standard that will live up to everyone’s exception (world accountant). I don’t know whether all these can be solved in the next five years or my life time. It would take a lot of consideration and understanding of each ones needs to come to some understanding.
Important Difference The single most important difference between U.S. GAAP and the IFRS is U.S. Generally Accepted Accounting Principles are considered more rule based and the International Financial Reporting Standards is considered more of a principles based accounting standards. Rule based accounting is basically a list of detailed rules that must be followed when preparing financial statements. Principle based accounting is used as a conceptual basis for accountants
The FASB/IASB Convergence Project
The quick development of the global economy since the last century has called for the need of one high-quality set of accounting standards and financial reporting systems that companies can use worldwide. In the last decade, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have been working together to determine the solution for that demand. While the original…
IASB AND FASB
The Relationship of the International Accounting Standards Board
and the Financial Accounting Standard Board
Accounting Theory & Research 541
The History & Relationship of the International Accounting Standards Board
and the Financial Accounting Standard Board
The International Accounting Standards Board (IASB), and independent standard-setting body of the IFRS Foundation was created after the Financial Accounting Standards Board (FASB) to develop and establish universal…
Accounting Standard Boards Paper
Accounting Standard Boards Paper
In the business of accounting two boards stand out the first one is the International Accounting Standards Board (IASB), and the second is the Financial Accounting Standards Board (FASB). The two boards are putting together this joint adventure to have a universal standard recognized internationally by entities for reporting of financial statements. This adventure will help to ensure that…
A Joint Venture: International Accounting Standards Board and the Financial Accounting Standards Board
ACC 541 Accounting Theory & Research
June 30, 2015
The Financial Accounting Standards Board (FASB), since 1973, has remained the appointed organization for establishing financial accounting standards for the United States. The organization is recognized by the Securities and Exchange Commission as well as the AICPA. The International Accounting Standards Board, established in…
Ifrs Versus Gaap
International Financial Reporting Standards vs. Generally Accepted Accounting Principals
Over the last decade, the world has become increasingly connected. Businesses are embracing opportunities abroad and gathering investors from a progressively growing international market. Globalization has given rise to a number of questions regarding multicultural business practice. It has also created a need for universal financial reporting that is consistent and useful to…
there are sets of standards that accountants need to follow when publishing information for companies. In the United States, it is required for companies to follow U.S. Generally Applied Accounting Principles, also known as U.S. GAAP. Outside of the United States in other countries and markets, accountants are required to follow International Financial Reporting Standards, also known as IFRS, for when they report on their company. Due to globalization, these two sets of laws or standards are beginning…
Publicly traded corporations entering the global market are gearing toward the convergence of financial reporting methods. The anticipated shift toward international accounting standards is targeted to assimilate all financial reporting into one standard rather than the many that are imposed across countries. The majority of publicly traded companies within the United States use GAAP; created by the Financial Accounting Standards Board and imposed by the Securities and Exchange Commission. The anticipated…
Acct 302- 511
In a day and age when more and more business is done online and on a global level, it has become easier for many businesses to grow beyond their own country’s boundaries. International convergence is a concept that is aimed at making global trade easier for all parties involved. The basic idea is to come up with a global standard of accounting to make sure that businesses across the globe can communicate, on a financial level, much easier. Imagine…
• Financial Accounting- is chiefly concerned with providing relevant financial information to various external users. Primary focus of financial accounting is on the financial information provided by profit-oriented companies to their present and potential investors and creditors.
• Financial intermediaries, includes financial analysts, stockbrokers, mutual fund managers, and credit rating organizations.
• Balance sheet = statement of financial position
• Income statement = statement of operations…
Assess appropriate internal controls, regulatory requirements according to the Sarbanes-Oxley Act, and fraud prevention and detection.
Use technology and information resources to research issues in financial accounting.
Write clearly and concisely about financial accounting using proper writing mechanics.
Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills, using the following rubric.